GENERAL – ABOUT THE SETTLEMENT

What is the NAR Settlement?

On March 15, 2024, the National Association of Realtors (NAR) reached an agreement with plaintiffs that would endlitigation of claims brought on behalf of home sellers related to broker commissions. On April 24, 2024, the courtgranted preliminary approval of the settlement. The settlement is still subject to final court approval scheduled to takeplace on November 26, 2024. DOJ approval is also pending.

What Does the NAR Settlement Change?

NAR has agreed to put in place a new rule prohibiting offers of compensation on an MLS. Offers of compensation couldcontinue to be an option consumers can pursue off-MLS through negotiation and consultation with real estate professionals,and sellers can offer buyer concessions on an MLS (for example, concessions “to pay for” buyer closing costs).The settlement did not change any laws or agency requirements related to mortgage banking, with the exception thatthe Agencies clarified the Buyer Agent Commission (BAC) is not included in the Seller concession caps.

When is it Effective?

Buyer Agent (BA) Agreements will need to be put in place on and after August 17th, 2024. For UHM, all purchasecontracts dated on or after August 17th must specify the BAC as shown on the BA Agreement, or include a copy of the BAAgreement, if it is a transaction in which a realtor is involved. Fully executed and accepted offers prior to August 17th,2024 that are not yet closed do not need to be revised to meet the requirements.Buyers shopping for a home will need to enter into agreements as of this date. Listing agreement for homes still on themarket on August 17th, 2024 will need to be amended to meet the requirements.8/12/2024: VA begins allowing the BAC for purchase contracts dated on or after August 10th, 2024. VA will permit apurchase contract to be re-executed if it was dated before this date and now a BAC must be paid. The appraiser must bemade aware of any new purchase contracts and reconfirm the value is unchanged.

What Does This Mean for Buyers?

• A buyer will sign a written agreement with their agent before touring a home (this engages a Buyer Agentarrangement).

• Before signing the agreement, the buyer should ensure it reflects the terms negotiated with the agent.

• The agreement must include 4 components concerning compensation:

1. A specific and conspicuous disclosure of the amount or rate of compensation the RE Agent will receive,or how this amount will be determined,
2. Compensation that is objective (e.g., $0, X flat fee, X percent, X hourly rate) and not open-ended (e.g.,cannot be “buyer broker compensation shall be whatever the amount the seller is offering to the buyer”),
3. A term that prohibits the agent from receiving compensation for brokerage services from any sourcethat exceeds the amount or rate agreed to in the agreement with the buyer, and
4. A conspicuous statement that broker fees and commissions are fully negotiable and not set by law.• Written agreements apply to both in-person and live virtual home tours.

• Buyers do not need a written agreement if they are just speaking to an agent at an open house or asking themabout their services.
• The seller may agree to offer compensation to your agent. This practice is permitted but the offer cannot beshared on a Multiple Listing Service (MLS)— MLSs are local marketplaces used by both buyer brokers and listingbrokers to share information about properties for sale.
• Buyers can still accept concessions from the seller, such as offers to pay closing costs.

A copy of the BA Agreement is required unless the purchase/sales contract clearly states the amount of the BAC.8/12/2024: Some States’ law will not permit the sales contract to include the BAC information on the purchase contract.The BAC Agreement will always be required in these states.

Link to the NAR FAQ

Does the BAC Need to Appear on the Closing Disclosure?

Federal TILA laws require Real Estate Commissions to appear on the Closing Disclosure, regardless of who is charged orwho is paying.

Can the Buyer Agent Commission be Financed into the Loan Amount?

No.

Is the Buyer Agent Commission a Finance Charge that will Impact Mavent or Change of Circumstance?

No. If the commission changes, it does not trigger the need to process a change of circumstance under TILA.

Can Buyer Agent Commission Paid by the Buyer Count Toward the Buyer’s Minimum Required Investment (MRI)?

No.

8/12/2024: If the BAC Changes, Is an Updated Agreement Needed, or is an Updated Purchase Agreement Acceptable?

If the BAC changes, a copy of the original agreement and the modification to the agreement will be required.

8/12/2024: If the Amount of the BAC Paid by the Buyer or Seeler Changes After the Appraisal has been Completed,Does the Appraiser Need a Copy of the New Agreement?

NEW: Conventional and FHA do not require the appraisal to be updated if there are minor changes in seller’sconcessions, when the addendum is dated after the effective date of the original appraisal. VA and USDA require theappraisal to be updated with any contract changes, even if they are after the effective date of the appraisal.

Do Bond Loan Programs Through Housing Finance Authorities (HFAs) and DPA Assistance Programs Allow theborrower to Pay the Realtor Commission?

This varies by HFA and DPA assistance program. Some may not permit the borrower to receive their assistance if theborrower is paying for the Realtor commission. Be sure to check the HFA requirements before taking the application. Ifthe program does not permit the borrower to pay for commission, the seller must pay the commission.

If the Agreement Shows the Broker is Paying Compensation to the Broker, is this Shown on the LE or CD?

This amount is only shown on the seller’s CD, just as realtor commissions have historically been shown. The amount isnot reflected on the buyer side of the CD and is therefore not on the LE. Be sure to check all sections of the Buyer AgentAgreement to identify if a fee to the buyer is also being charged. Any fee charged directly to the buyer must be on thebuyer’s side of the CD.

If the Property is For Sale by Owner (FSBO), is a BAC Agreement Required?

It is still possible that the buyer has an agent, even if the seller does not. If the purchase contract indicates the buyer hasan agent, verify the amount of the commission and who will be paying it. If the purchase contract does not show aRealtor is involved, then no further action is required.

CALCULATING THE AMOUNT OF SELLER CONTRIBUTIONS/CONCESSIONS

If the BAC is 3% and the Seller is only Willing to pay 2.5%, is the Remaining .5% Shown as Funds the Buyer will Need toVerify in Total Funds to Close?

Yes.

If the BAC Paid by the Borrower is Shown as a POC, is Verification of Source of Funds Required?

Although it seems unlikely that the buyer would pay this in advance, the source of funds documentation must meetagency requirements as applicable. The commission is treated just as any other fee related to the transaction.8/12/2024: UHM must fully document the funds were available and cannot accept just a statement from the Realtorthat the funds have been paid.

Can the BAC be a Promissory Note or Loan?

No. The source of funds must meet Agency requirements and unsecured borrowed funds is not acceptable.

Can the Borrower Make Installment Payments to the Realtor?

All the compensation to the Realtor must be paid no later than the day of closing.

If the Purchase Agreement States, “Seller to pay 9% of the Buyer’s Closing Costs,” can these Funds be used to Coverthe BAC When the Fee isn’t Specified on the Purchase Contract?

Yes, however, Agency limitations on allowable closing costs paid by the seller still apply. Here’s an example:

Scenario 1 – Conventional – High Seller Contribution:

Details of the deal:

• Conventional 95% LTV loan with a cap of 3% IPC

• Buyer’s Agent Commission Agreement states a 3% commission

• Purchase contract shows the Seller contribution will pay ‘up to 8%’.

How it works:

• Calculate total closing costs and prepaids and include the BAC of 3.0%

• Apply the lesser of 3% toward allowable closing costs/prepaids/discount points, or total costs

• Apply 3% to the Buyer’s agent commission• Any remaining funds would not be useable, and the seller would keep these funds (Not a good negotiation resultfor the buyer).

Have the Agencies Changed their Allowable Seller Contributions as a Result of the NAR Settlement?

No. All Seller contribution caps and calculations remain the same. The Agencies have confirmed the seller’s payment ofthe Buyer Agent Commission is not considered a seller contribution. This applies to Fannie Mae, Freddie Mac, FHA, VAand USDA.

Conversation Limitations

The negotiation of the BAC is between the buyer and the Realtor. No Loan Officer is permitted to be involved in this conversation.

• Under no circumstance is an Loan Officer to provide an amount of commission the borrower can afford.

• Under no circumstance is an Loan Officer to state any amount of commission the buyer should negotiate. This includesprohibiting giving any advice on typical commissions in the market or a range of commissions that they areaware of.

• The amount of assets the buyer has available is not information to be shared with any outside party. This isconfidential financial information – and always has been.

• The Loan Officer may not engage in any activity normally conducted by the Realtor or activities that could beconsidered the Realtor’s role, which includes but is not limited to reviewing or discussing listings withborrowers. Loan Officers may not agree or acquiesce to any Realtor requests to provide information to buyersregarding the BAC.

Hope this helps

U/nfortunately… BUYER AGENT COMMISSION FAQ THIS DOCUMENT IS FOR UHM INTERNAL USE ONLY. THE INFORMATION HELD HEREIN IS SUBJECT TO CHANGE AT ANY TIME.